-->Hi,

der in Langfassung (z.T. auf deutsch) bereits bekannte Beitrag, der Geld nicht aus property schlechthin (Eigentum), sondern aus Steuerforderungen des Obereigentümers (Herrscher, Staat) gegenüber seinen Untertanen (Unter-Eigentümer an ihrer eigenen Person sowie an Sachen bzw. künftigem Eigentum = Einkommen) ableitet, liegt nun in der (gekürzten) englischen Fassung vor.

Falls sich jemand den Tort antun möchte, bitte sehr. Etwelche Einwände an dieser"Steuer(schuld)theorie" des Geldes sind selbstverständlich willkommen.

Mögen auch jene, die den sog."Debitismus" (= Wirtschaften ist nicht Tauschen, sondern der laufende Erfüllungs- bzw. Tilgungsversuch von mehr als eine Person / Institution umfassenden Schuldverhältnissen, wobei jene Schuldverhältnisse ex nihilo, also Abgabenforderungen an erster Stelle stehen und sonstige Schuldverhältnisse, insonderheit die kontraktlichen nur nachfolgende sein können) mit Argwohn betrachten oder auch (gerne) rundwegs ablehnen, das Ganze mit Gewinn zur Kenntnis nehmen!

In einer Fußnote (nicht sichtbar) habe ich mir erlaubt, dem Forum in toto zu danken:

* The author acknowledges the participants at the “Jürgen Küßner Forum” - www.economynet.biz - for their numerous suggestions, patience and circumspection during the discussions of the article, with the author’s sole responsibility for all errors. Unless stated otherwise, emphases in quotations are the author’s. [Die emphases sind im geposteten Text nicht wiederholt].

Die references (benutzte Literatur) werden in einem weiteren Posting nachgeliefert, da der Platz für das gesamte Posting nicht ausreichte.

Viel Vergnügen + herzlichen Gruß!


Power, the State and the Institution of Property*

Paul C. Martin

“A theory of power has long been the Holy Grail for political science, but the Grail has not been found.”
(Mancur Olson 2000, 2).

1. The institution of power and the institution of property:
An alternative theory of interest and money

1a. The supreme ownership of properties and persons by the State

Property theory is based upon private ownership of res, particularly upon property of land. From the beginning of written evidence in ca 3200 BCE Mesopotamia, power and property have been inseparable. “Royal property was administered at the ruler’s discretion, and in this sense may be considered to be the first truly private property” (Hudson 1996, 10). The su-preme ownership of the State, which allows the State the legal ownership of all private prop-erties lying within its borders, is being overlooked in most of economic theory. Nevertheless, “the State [has the right] to consider the national property as its own, that is, as an undivided property, belonging entirely and absolutely to it” (Baumstark 1833, 392). Also Ralph Haw-trey speaks of the “sovereign power over property”, where “first comes the power of taxation” (1930, 10).

Power, property and property-based prosperity are often interpreted “politically.” “The in-dividual rights [that is, property and contract rights] that a democracy provides cannot be se-cure if the democracy is not” (Olson 2000, 41). Mancur Olson does not consider the costs of his “outside power that enforces contracts” (63), which must exist, before democracy and “free economy” related to it can come into existence. He only proves that very high taxes are counter-productive (McGuire and Olson 1996). This ignores the problem of pre-financing those who impose the taxes - be it autocrats (“stationary tax bandits”) or democratic bodies.

The path temporarily adopted to combine power, State and property with the help of a “compulsion theory” does not strike the core, either. “Coercion includes all concerted applica-tion, threatened or actual, that commonly causes loss or damage to the persons or possessions [recte: properties] of individuals or groups” (Tilly 1992, 19). The two questions that remain unanswered are: (i) How are the “coercive means” financed? And (ii) how do they affect pri-vate property and contract dealings and, thus, the “economy” within the State?

1b. The misinterpreted concept of “personal freedom”

In particular, property theory does not deal with ownership in persons. A person under the secure ownership of another person is also res. An interesting option in former societies was the voluntary conversion into a res for personal benefit by selling the property in one’s own person. “An opportunity to rise and be noticed by someone with power was of more advan-tage to the slaves than to the poor free persons“ (Veyne 1995, 269). Also a person who lived on the ownership in another person (serfs, persons subject to land servitudes) was partially or entirely un-free. His supreme owner was the landlord, whose supreme owner, in turn, was the State.

Those who hold property themselves are to be considered as “free citizens.” This concept however is a myth. A person is not free, because he/she has to pay taxes to a higher authority, as soon as he/she is within the limits of the authority’s property or supreme ownership.

During the Peasants’ Revolt in Germany in the 16th century, the demand for “freedom” was for “independence” from taxes, like tithe, death tax or serfdom (Lotzer and Schappeler 1525). The woodcut showing the freedom flag (fryheit) that flutters beside a lansquenet armed with a sword is legendary (Murner 1522, P 1b). The inscription on the Philadelphia “Liberty Bell” refers to Leviticus 25, 10. This has nothing to do with personal freedom “as such” in some idealistic sense, but refers to sheer materialism: to freedom from tax-resulting debts.

The attempt to gain ownership in one’s own person played an important role in the struggle against the poll tax in the Lollard revolt in 14th century England (Heinsohn and Steiger 1981) as well as in France during the “Jacquerie”, a peasants’ revolt against soldiers and the aristo-crats, who imposed taxes on them. The peasants’ liberation in Prussia 1807-1811 also resulted only in a partially “free” citizen. The peasants escaped serfdom and tithe, but had to pay com-pensations, for which a non-contractual, ex nihilo debt was imposed on their farms.

From 1873 onwards, the Japanese farmers were granted personal “freedom” from the feu-dal service and obtained “free” ownership in land (as “private property” in the constitution of 1889). As a countermove, they were forced to pay an annual land-tax of 3 %, which was the main source of income of the State for several decades. A similar case most recently occurred in China. “Private property came into being in the People’s Republic of China with the sup-port of the constitution.... However, the State retains an expropriation right“ (Die Welt, 23 December 2003). The expropriation right belongs exclusively to the State.

1c. The rise and fall of “property based economies”

The taxes that contribute to the coercive power of the State do not only rise absolutely, as explainable by the “liberated” economies, but also relatively, In 1850, the German taxes were 7.6%, based on the net national product at market prices; and 10.6%, in 1913 (Hoffmann 1965). Today, the duty burden (tax plus social security contributions) amounts to some 50%.

According to the OECD’s statistics (10 September 2001), the OECD States’ average tax-to-GDP ratio increased from about 25 to over 37% during the period from 1965 to 1999. At the same time, the State debt exploded, which could have been covered only with the taxes to be imposed later. Actually, State debts are as much as thirty times higher than in the mid-1960s. The average public-debt-to-GDP ratio of all “developed” economies lies between 60 and 70%. Forty years ago, it amounted to around 20%. Whether accompanied by “private” property or not, the financial downfall of all power systems, are innumerable in history.
Money as a “currency” or “legal tender” as defined by the power system “State” is also property (not a claim by any chance!). In case of taxation, not “income” is transferred but property.

The institution of property results in costs in the form of property to be transferred to the power. This should not be confused with the “transaction costs”, as the transactions are only possible provided that something exists that is transferable (see Steiger 2006b). In short, the concept of “free property” is as much an economic chimera as the “free property owner”.

1d. The problem of the “intangible” act

The institution of property cannot be defined without the power to tax. Private property with-out the exercise of power simply is a myth. “The tax system cannot be evaluated by its impact on private property, conceived as something that has independent existence and validity. Taxes must be evaluated as part of the overall system of property rights that they help to cre-ate” (Murphy and Nagel 2002, 8). Creation always precedes existence.

Gunnar Heinsohn’s and Otto Steiger’s approach of property economics claims that “prop-erty rights are de iure claims.... Property rights … transform possessory rules into possessory rights regulated by law” (Steiger 2006a, 186). However, ius - as far as it can be historically reconstructed - is set by rulers, who themselves need to be financed before they can impose the legislation and secure compliance with it. Power, State, coercion, taxes and their financing - everything must precede property rights, not only historically but also theoretically: power precedes taxes, taxes precede property - but property precedes taxes, which finance power. We observe a circulus vitiosus.

1e. Pre-financing of power

The research paper for the Symposium, on which the collection of essays in this volume is based, states that “property... can only be brought by a legal, i.e. an intangible act” (Steiger 2003, 1). However, legal acts do not take place “naturally.” They must be established by power. “This act presupposes”, as Steiger (1; last emphasis in the original) continues, “inde-pendent institutions of law to defend and enforce contracts between free citizens.” As these “institutions of law” practice power (“defend and enforce”), they must be financed. The “free” citizens again are un-free, because they must pay compulsory taxes - at least for the founda-tion of law and its enforcement.
It is the fundamental error of all economic theories that they plant their models in a power-less nirvana. Even the simplest neoclassical production function based on a combination of capital and labour is unrealistic, as it does not discuss what it is in particular that secures capi-tal (“wealth”) or the combination of capital with labour.


1f. Census, circulation of money and property

Georg Friedrich Knapp (1924 [1905]) and Hyman P. Minsky (1986) have emphasized the role of money (“legal tender”) as the medium of tax payment. So do two leading Post Keynesians of our time, L. Randall Wray and Stephanie Bell. ”The public needs the government money in order to pay taxes” (Wray 1998, abstract). “Only the State, through its power to make and enforce tax laws, can issue promises [that is, Government money] which its constituents must accept if they are to avoid penalties” (Bell 1998, 1).

Only after the tax medium (census) can be “circulated” we can deal with “genuine money.” Taxes can consist of grain or eggs, but grain or eggs cannot circulate like precious metal or modern banknotes. This explains the desperate search for the “money stuff”, for example, in Ancient Mesopotamia (Renger 1995).

Modern sociology connects power with power financing. “The taxes first create the mate-rial basis for the power monopoly, which once again guarantees the monopoly of taxes, so that the State is assigned to both the key monopolies“ (Anter 2001, 125 f.). But as taxes must al-ways be paid in a medium defined in advance, the money monopoly is absent. We have a tri-ple monopoly of power: armed coercion, money, and taxes. My conclusion - power precedes taxes, power precedes money, power precedes property - is thus applicable again.

1g. “Roma quadrata” versus Mesopotamia

Property economics favours the beginning of private property through the Roma quadrata (Heinsohn and Steiger 2004 [1996], 118 f.). But private property already existed in tribal so-cieties (Wesel 2001). Even the division of Rome did not take place without exercising power. Romulus killed Remus and became the first king without delivering his sword.

Herodot (II, 109) discusses a parallel case. Pharaoh Sesostris divided the country “amongst all the inhabitants” in equally sized square parts and imposed a tax. As “each transformation, which is carried out through the systematic distribution of shares, corresponds idealiter to the constitutional conditions of the property economy“ (Heinsohn and Steiger 2004 [1996], 119), the question remains: Who regulates distribution and holding of shares with what?
After the “systematic distribution” of land, the Pharaoh, who had marked his kingdom (as his private property!) up to Beirut with the help of two steles (Herodot II, 106), would either maintain his property and lease it, or he would distribute it de iure and simultaneously impose taxes on it. Thus, he would certainly have ceded property but also received a property title, namely the monopoly, which would have entitled him to levy taxes - again as the supreme owner.

As we are aware, there is no clear dividing line between the individual benefits (privilegia, as shown in the famous mosaic at San Apollinare, Ravenna). Do we still have to deal with de facto possession or, in this case, with de iure property? The development of the so-called “fiefs” proves that property initially emerged from the land rented for possession (Reynolds 1994). While considering the complexes of power, possession and property in structures com-peting horizontally as well as vertically, we can refer to Volckarts 2002 (95-135 and 228-271).

1h. What was the purpose of interest free credit?

Heinsohn and Steiger (2004 [1996], 275 f.; see also 2006, 118) discuss the interest contracts from the Egibi-archives (”Each month 1 shekel silver was added to the debt payable by them [the debtors] for one mine“) and describe the interest as the “realised property premium.” But debt contracts in Babylon in the first millennium BCE included money debts (hubuttutu) against security certificates (ú-ìl-tim); and some debts were non-interest-bearing. “16 shekel silver capital belonging to Zeru-ukin... debiting Nabu-usallim.... The silver payable by him does not increase till the end of the month of Siman” (San Nicolò and Ungnad 1935, 197). Or: “6 shekel for 1 mine, interest-free loan, belonging to Ikisa, the son of the Bel-nasir,... payable by Musezib-Marduk.... It was given in the month of Dumuz“ (270).

However, interest had to be paid after expiry of the months for which the credit had been given without demanding interest. How can this be explained?

1j. Delivery date, rate of interest and power

In neoclassical economics, all goods having a value are regarded as being “scarce.” In reality, neither goods nor money “as such” are scarce. They are scarce only on the date when they need to be available (for example, water for the thirsty or money on the day of tax payment). If there were no deadline for the payment of money, it could not have been defined. Money with respect to which there has never been a payment deadline is, for “money purposes”, per definition worthless - irrespective of the “support” from which it evolves, namely metal, which can be used as jewellery, or paper, which can help lighting a cigar.

Amount and deadline of a payment must be known in advance. In antiquity, this process started with taxes imposed by the power system. If silver was the tax commodity, it first went to the temple banks. The rate of interest corresponded to the sanction that was imposed on the late tax debtors by the tax charged. Interest is not an outflow of private property (as a settle-ment for waiving the property premium). It is a result of the tax itself that would not exist if there were no a priori deadline. Interest is primarily the tax itself (census), payable on the due date.

In Mesopotamia, annual interest rates amounted to between 20 and 40% for centuries (Homer and Sylla 1996, 61). Yields from 20 to 40% cannot be achieved in the long run from any property in the world. Therefore, we must ask: why such high interest rates? The “pri-vate” interest receiver exploits the predicament of those who are under obligation to pay taxes, but cannot acquire the tax commodity within the payment deadline and, hence, are forced to take an “interest bearing loan” of the tax commodity to avoid the sanction.
Silver was demanded as tax in the Babylon temple treasure system. The procurement of silver is difficult, as it is not found naturally in the prescribed “white” (pure) form. It can be manufactured, however, with many difficulties only (Forbes 1940), which again requires the power for standardizing silver (Radner 1999b, 130 f.; Bongenaar 1999, 164, 172)
Bernhard Laum’s idea of “holy money” is based on the temple bank system. Following Knapp’s State theory of money, Laum (1924, 160) describes money as “a creation of a reli-gious-governmental (!) legal system.“ The prevailing power defines “valid” money and, after it has been issued in a standardized manner, the power system also defines the relevant taxes, alias the “interest”, or, as presently known, the central bank “rate.” Like the modern central bank, the temple bank was the key element of the power system.

1k. The origin of prices by evaluation of sanctions

How does one arrive at prices in this respect? The rate of the tax commodity and vice versa the rates calculated in that commodity, they both arise from the sanction cost in case of non-adherence to the tax deadline. The deadline constructs the rate, incidentally the realized rate and not the demanded one.
For example, if 1000 tax units (product A) are payable, then the relative rate is calculated as follows. One has to procure 1000 units A with the help of x units of product B. Thus, prod-uct B has a rate in proportion to product A that is measured in units of product A. If 1 ton of grain = 1000 units A, then 1 kilogram of grain equals 1 unit of A (for example, 1 gram of sil-ver, provided that silver is the tax commodity). Accordingly, “relative” means depending upon the quantity of both products (A and B) available at the exchange date or even A in C, D etc. - and thus finally of all products.

The sanction cost can be determined from non-payment of tax: for example, if I can pay only up to 50% of the tax (in product A) and must replace the remaining 50% by products or services B, C, D etc. to complete the total 100%. The debtor can first try to obtain A with the help of other goods. Only if he fails at that should he take out a loan. In this case, he must later share the A he has received with the person who has advanced him the A for the payment of the tax on the due date. Since deadlines can only be enforced by power, the property theory of interest, money and the economy, again, must propose a theory of power.

2. Why the property theory must presuppose a theory of power

2a. The institution of power: Athens

According to Plutarch (Aristides, 24) and Diodorus (11, 47), power (dynamis) was the “ability to pay.” This can be studied from the finance system of the Attic power, which failed right down the line. How then did the Attic State power (demos) at first finance itself? Uwe Wagschal (2000) gives the following explanation: the taxes were externalized to secure at-tainment of the power of the demos.

This first affected the metoikoi. Men had to hand in twelve drachma; and women, six. “In case of non-payment, one was subjected to slavery.” This source of income of the demos ap-peared to be so alluring that Xenophon (De vectigalibus) suggested a larger metoikoi colony to restore the national budget. Apart from this, revenues were obtained from the silver mines in Laureion (State property). The demos power acquired from their lease of mining rights was reflected in the massive influx of the Attic “owl coins”, which all were of the same power-set standard: the tetradrachma with ca 16.4 grams.

Then, taxes (liturgies) were imposed on the wealthy people. It cannot be ascertained that these people who owed the demos their liturgies could mortgage their properties to generate money for the payment of the liturgies. The rich could escape confiscation and expropriation through the exchange of property (antidosis). A person, urged into paying taxes by the demos, could name another person, who had to pay on his behalf. If that person denied to pay, then the properties were exchanged - an instructive form of taxation.

Up to 50% of the total expenditure came from the cash office of the Attic naval union. “The union contributions had a tribute character and were even described per se. The apos-tate allies, who wanted to evade financial burden, were... destroyed or punished by the mili-tary of Athens.... The demos could thus re-externalise their power costs.“ Athens also aimed at “incomes from the ‘ancient concept of the most distinguished revenue groups’, namely war and robbery“ (Wagschal 2000, 267). Later on, tributes were established in the form of prop-erty taxes (eisphora), lease taxes (symmoria), advance payment of taxes (proeisphora) by 300 of the richest citizens, customs duties, excise and market duties, special taxes for socially un-acceptable professions, as well as confiscations. Thus, power costs were again internalized, with the corresponding contractive consequences of all tax systems.

New research work on Sparta arrives at the same conclusions (Thommen 2003). Each year, war was declared (formally) anew on the helots of the Spartan Eurotas valley, who were liable to pay tax. The metoikoi paid taxes, as did the messenians in the neighbouring valley - a valu-able parallel to the “origin of State” that Carneiro (1970, 10) has described as a characteristic of Peru. As the power costs could not be re-externalized any longer, after Leuktra (371 BCE), the Spartan soldiers had to serve other powers to obtain their own power.

2b. Power, weapons, sovereignty

Private property, taxes, money, interest, etc. are power derivatives and have not been devel-oped, therefore, from any preceding “private economies.” The power theory of economies based on property, therefore, runs as follows:
The property title “power” precedes all other titles. Titles can only exist if they are pro-tected. This is possible only through threatened or actual use of weapons. Weapons protect the property of themselves by themselves: In their case, both possession and property fall to-gether. The person possessing weapons is their proprietor because he can eliminate the own-ership of weapons by others.

The development of taxes and of the “money” with which the former are paid proceeds correspondingly. The following applies at the beginning: “The money is taken, so that it can-not be possibly passed on further“ (Gerloff 1943, 157). The person demanding money is in a position in which the person compelled to pay is not. This represents a position of “monop-oly” power (chief, father - owner - of the bride etc.). Only after the monopolist has found a way to disburse the money payable to him, without losing his power and/or monopoly posi-tion (Schurtz 1898, 15 f.), can the money be referred to as in the present sense.

This does not lead to the “common” market but an initial sub-market, where the means of preserving power can be purchased: the mercenaries. One of the largest markets for mercenaries was established at Tainaron, the southernmost tip of the Peloponnes, where up to 5000 men were transferred at once (Thommen 2003, 112 f., 176-180, and 186 f.).

2c. Does any price for power exist?

As far as I know, an economic analysis of power, apart from Adrian Oswald’s (1999) so-called “concept outline”, has not been delivered until today. However, if property is a com-modity and must be priced, then power must be defined as an economic commodity and also be priced, as property cannot be defined without power.

The value of power is decided by what it can demand in form of property. Can such a “value” turn into a price? Definitely! In 1663, the Carolinas, estate and “property” of Charles II of England, Scotland and Ireland, had been ceded to capitalists “with all rights” in return for their support in his efforts to regain the throne. The Carolinas became a company, “the whole to be divided into eight equal parts.” The shares belonged to the “Lords proprietors” (sic). In 1729, the king re-purchased the shares to regain sovereignty over the region (Carolina 1729, 551): 17,500 pounds were paid for each share - the price for power.

This cession of total power over private property differed from the cession of partial power over companies, which were formed per Charter. In the mid-1550s, the Crown had to pay an amount of 148,526 pounds equalling 14% per year for her debts (Scott 1912, X) and faced bankruptcy. New sources of income were tapped through the sale of disclaimers of en-forcement against private properties of a businessman, who was henceforth only liable up to the paid-up capital. Trading and mining companies were established en masse (detailed list in Scott 1911, 461-465). They were not “approved” to encourage trade and exchanges, but drew additional power-securing revenues (duties, seigniorage, etc.). The economic lead of England till the 19th century was not a result of an a priori “free” economy. Preserving “status” (State power) was the priority. Economic “development” is the result of power fighting for its exis-tence.

2d. The execution of power as force and law

When power exists, then tax is the epitome of the force exercised by power, as demonstrated convincingly by Geoffrey Brennan and James M. Buchanan (1980). Weapons, however, are only indirectly mentioned in their book, even though it begins with a statement of U.S. Su-preme Court’s chief justice John Marshall (McCulloch vs. Maryland): “The power to tax in-volves the power to destroy.” How can you destroy, except with an armed force?

Extensive studies have been made on the topic, based on Maurice R. Davie’s pioneering treatise of 1929 (Tilly 1985 and 1992, Keeley 1996 and Bonney 1999). But throughout, the use of weapons is considered more as a “faux pas of civilization” than as the driving ramp for property, money, interest and, hence, economic development.

Other research (for example, Bernbeck 1994) deals with the development of tribute sys-tems, again however, without mentioning armed force, although it must have existed. How can a wall that surrounded a standard village declared as “egalitarian” and, hence, not equipped with a distinct internal power structure, be explained otherwise (Bernbeck 1994, table IX)? The same occurs in case of “cities” that reveal corresponding structures, for exam-ple, of the money-less Harappa culture (Heinsohn 1993, 42). Finally, Bernbeck (1994, 50-53) drives his “model description of the tributary production method” into an aporia. He does not answer the question: How is the tribute achieved?

The armed force brought obligations into the world (debts ex nihilo), as has been proved in case of the valley of Oaxaca (Flannery and Marcus 2003). The research first dealt with a test of the Kelly thesis (Kelly 2000), according to which wars and their after-effects, like spoils and tributes, started as soon as a “rich environment” increased the population, whereupon raids begun from the largest village. The village built “abundant storage facilities” for surplus and secured itself with palisades (3260-3160 BCE). The inhabitants demanding tributes fi-nally settled in Monte Alban with a 3 km long palisade wall - similar to the acropolis-phenomenon of the ancient world. Separate research had to be done to determine the level of additional importance of climatic changes as formulated by the refugia theory (Schulze 2004).

2e. Ceding of power, transaction costs, grading of property

The State never is the legendary “wealth or utility maximizing ruler”, as Douglass C. North (1981, 23) is convinced. Only as the owner, if not monopolist, of the weapons, does the State always try to maximize its own “wealth”. By referring to the development in medieval Eng-land (1924, 101), John R. Commons (1924, 101) explains how batches of wealth occurred under the first power level. “The starting point of modern economics and politics begins with conquest.... The unlimited legal power of William was equal to, rather was identical with, the unlimited liability of any subject to have that power used against him.”

The power then expanded its “outcome” through cessions, in which further assets emerged, which, on their part, created debt and payment pressure with the help of incurred liabilities, finally resulting in wealth by discharging these liabilities. A society of sub-owners was formed, who, on their part, supported power.

The more multi-staged the property is, the larger the wealth-maximizing process. The State as the power-owner can only run into national debts. Private owners can do more: They can mortgage land, automobiles, fixtures, copyrights, securities, business concepts, eventually even their future earnings (properties) through an overdraft facility. This authorizes the de-mand for maximizing property like that for the creation of additional property rights.

3. Debts, power and the economy

3a. The debt ex nihilo

The tax system imposed by those with power onto those without power or foreigners creates a surplus by force; this is understood from the research works dealing with the Ur-III-period, for which planned-actual calculations have been reconstructed (Nissen, Damerow and Englund 1991, 86-90, catalogue no. 10.14, 11.1). “The final ‘outcome’ registers... an accu-mulated deficit,... which was carried forward to the following year as the remaining liability. With the help of other texts, we understand the serious consequences for the controller and his budget caused by such a comprehensive monitoring of the increasing deficits. The deficits must be settled appropriately at any price.“
The same was observed during the introduction of tax in an occupied territory. The follow-ing appears in the discussion on tax-driven money carried out by the Post Keynesian research group around Wray (1993 and 1998), now located at The University of Missouri, Kansas City. “Taxation turned out to be a highly effective means of compelling Africans to enter cash crop production and to offer their labour for sale... The population, pressed by the necessity to pay its legal requirements, sells to the government in exchange for currency.... The govern-ment is the only institution that has the power to impose a tax liability on the entire popula-tion. Thus it can choose at will what it will accept for settlement of tax obligations.... In the beginning there was debt” (Stitcher 1985, as quoted in Tcherneva 2002, 31 f.).

Taxation as ex nihilo debt determines something alike for all affected persons. Standardiz-ing tax liability and notifying this standard to all individuals is the easiest procedure (a public notice is sufficient). Thus, the State has always emphasized, as precisely as possible, the de-termination of money “stuff” and its tolerance right from the first standard of coins (shekel = 180 grains of 46.75 milligrams each, thus 8.4 grams). The money determined in this manner is the tax.

The word “firm” originates from the Anglo-Saxon word feorm, which means the levy of taxes by the king, who secured his power through its presence. Thus, the kings did not have a permanent residence initially, not only in Europe but also in Africa and the South Pacific (Peyer 1982). The Dukes of Burgundy, for instance, mostly stayed at one place for three days only to cash in.

3b. On the value of weapons and the alienation of property

The value of weapons is equivalent to what can be demanded or obtained with their help. The golden daggers obtained from the excavations in Ur and those included in the Ebnöther col-lection (Schaffhausen) as well as those from the tomb of Tutankhamen, are not “ornaments”, but show that their bearers are capable of exercising power at all times and, thus, in a position to demand taxes. The weapon is the attribute of the “free” man on whom property economics is based, which, however, does not perceive that the private unrestricted ownership of weap-ons of any type does not exist any more.

Even the ownership in persons could only be retained with the help of weapons, see the representation on the Ishtar-Stele at the museum in Idlib, Syria (P. Matthiae, Pinnock, and G. S. Matthiae 1995, 390 f.). There, we see a naked slave being handed over to the new owner in the style of the mancipatio of Roman Law. The buyer holds a wooden baton (gis, gan) in his hand, which was considered to be essential for the legally secure transfer. “Passing the slave... over the wood... was then an symbolic act by which the seller declared his removal and the relinquishment of his ownership rights over the property. Once the slave or property symbol was made to cross, … the sold object ceased to be legal property of the seller.” Wood was a “symbol of the boundary” (Mallul 1985, 72). This gave rise to the standardized “bukannum- clause”, which was stated on all property transfer contracts (68).

The transfer of possession was carried out informally, but not that of property. Even the medieval German Sachsenspiegel (II, 35; III, 4 and 90, etc.) provides evidence that any per-son who passes off something as his/her mobile property is also obliged to furnish proof of his/her ownership (witnesses, oath). Otherwise, he/she is considered a thief.

3c. The marginal value of weapons

The weapons and, therefore, power in the form of the armed force, are used as long as their costs do not exceed the profits that can be achieved with their help. The progress in productivity for use of power is based on minimizing the cost of the forced means, that is, the weapon, without losing its monopoly. Weapons, in the early times, were made of stone or metal. A significant obsidian centre was Melos. The Athenians, armed with bronze weapons, put an end to the potential rivalry, conquered the island and killed the inhabitants or sold them as slaves (Thukydides, V, 84).

Weapons bear the evidence of their property nature. Labelling is similar to that of the brand (sindu) on animals like in the societies with private property of the 1st millennium BCE, where these brands consisted of characters or tattoos (San Nicolò and Ungnad 1935, 100 and 134).

The word Syrakosio was written on the bronze helmet found in Olympia (Müller 2002, 95). Mesopotamian daggers bear names like Tishpak-Iddin or Ilou-Illasou, son of Kidin-Sah, even phrases like “I belong to Kadashman-Tourgou, the king of the universe“ [!], dated 1281-1264 BCE. Axes and spearheads with inscriptions are to be found in the relevant Foroughi collection (Arnaud 1962; for weapons with evidence of ownership see Nagel 1959/1960). A bronze sword showed the name Dareios (Borger and Uhlemann 1963). This can be compared with the spear and its inscription “The palace of [King] Anitta”, which was found in Kültepe (Hethiter 2002, illustration 7, 61). Even sling leads (molybdeis), used extensively in the third century BCE and having no asset value, mention their owners: for example Achaioi or Nau-sikrates (35.6 grams; the author’s collection). A sword discovered in the river Zihl flowing from the Swiss Lake Biel bore the name Korios in Greek letters (!) (Müller 2002, 132).

4. On the circulation of power

4a. The start-up of the circulation of power: the mercenary

As mentioned by Herodot (III, 95), Dareios accepted large quantities of gold and silver as tributes, in total 4,680 talents each year (one talent weighing 25.92 kilograms). The precious metal was melted and filled in jugs and some of it would be cut out “as required” (III, 96). What was the requirement about? Dareios got coins minted in gold, which showed a picture of him posing as a warrior (spear, bow), the so-called Dareics of 8.4 grams each and artifi-cially standardized at 23 carat, even though he ruled a kingdom without markets and debts (Herodot I, 153; II [?], 138). The Persian rulers even depicted their territory on their coins, as the tetradrachma (15.19 grams), which has a relief map (Ephesos?) on the reverse side (sold at the Gorny & Mosch auction 125 on 13 October 2003). The Attic standard for coinage showed that it must have concerned money for paying the Greek mercenary. This “exchange” of the Persians was not a private business but the purchase of preservers of power. Thus, the first “circulation of money” developed: (ii) tribute, (ii) redistribution of tributes in the form of pay to those who stood by the tribute system, and (iii) reflux of the pay owing to demand of tribute by the tribute demanding power. In the Greek poleis, power territory was marked by letters: TARAS for Tarent, META for Metapont, ATHE for Athens, etc.

The system of the “power cycle” has for long been described by numismatists. “Hard money came into being,... where wars were fought with mercenaries... and not due to the demand of trade“ (Nau 1962, 1467; similar Franke 1983, 17-20). “The payment of mercenar-ies must also not be forgotten”, as the outstanding numismatist Philip Grierson (1958, 135) reminds us. Why? Coins circulated in “trade” or “barter trade“ wear out more than those that remain in the power cycle. Grierson (1958, 135) states that most of the coins found in hoards were of a ”very fine and better” quality. “A non-commercial [!] origin seems to me indicated by the un-circulated condition of many of the coins.”

Research on the “rainbow bowls“ found in South Germany verify that their gold was not of local origin but came from the Middle East, and that it was apparently imported by Celtic mercenaries (Pernicka 2003). Detailed metal analyses (platinum, iridium, osmium) prove that the gold obtained from the Pactolus river near Sardeis was transported as far as to Ur (!), where it was found in the kings’ graves of 2600 BCE (Moesta and Franke 1995, 13 f.). The metal was not transported over this distance on peaceful terms, but - owing to the exercise of coercive power or the demand for gold - with the help of the armed force. How could the kings of Ur, who demanded mainly grains (see texts from the neighbouring Uruk in Nissen, Damerow, and Englund 1991, 12, etc.), have carried out long-distance trade in grain?

Apart from that, in Mesopotamia there were no trades of fungible goods till the middle of the first millennium BCE. “There are no [!] sales contracts available for fungible things, grains, oil, wool, metal, etc.; as according to the Babylonians, contracts of sale can only be made for individually specific things (purchase of pieces of goods)” (San Nicolò and Ungnad 1935, 98). The interaction between Sardeis and Mesopotamia can only have been related with mercenaries or tributes, as long-distance purchases of “mobile properties”, such as furnish-ings, slaves or livestock, were obviously senseless.
The oldest known coins are actually large and not small change, thus the theory of invent-ing money as a “means of exchange” for the “private“ economy is basically wrong (Kraay 1964). Likewise, the debate on “all-purpose-money” versus “special-purpose-money” (see Polanyi 1957a and 1957b) is superfluous. Money standardized by power started with “first-purpose-money“ as a means of preserving power.

Minting of precious metal (argentum signatum) in Rome also starts in connection with weapons in 269 BCE: “The Roman people did not use any silver coins before their victory over King Pyrrhus“ (Plinius, Nat. Hist. 33, 42). Initially, the Romans were familiar with cop-per tax money (“Aes Grave“), with the help of which weapons could be manufactured. The concept that this “money“ was used for transactions in the markets or even as a “means of exchange“ is unreasonable. The “heavy coins“ weighed up to 1550 (!) grams per piece. An “As“ (= unit) was not less that 50 grams, even in the 2nd century. Thus, a housewife going to the market with “money” for exchanging would have had to carry more weight than she had to while returning home with the things she had bought.

The silver for the Romans came from Tarent. And the Tarentine coins, in turn, were first used “as means of payment for the mercenaries [!] of Pyrrhus, whom the Tarantines had called for help in the war against Rome“ (Franke / Hirmer 1964, 82). These coins were even minted on the Greek Drachma-standard, which the Romans took over with their Denars at almost the same weight. Rome joined the power cycle.

After Cannae (216 BCE), this becomes clearer, as Rome hardly used its own (dead or wounded) troupes, depending, instead, essentially on mercenaries. Precious metals were re-quired to recruit them: “In 216 BC, in the most critical phase of the two Punic wars, the first gold [!] coins were found with the scene of oath-taking“ (R.-Alföldi 1964, 150). The scene represented the commitment of non-Roman mercenaries. Similar war coinages have been re-ported from Athens in 407/406 BCE, where around 100,000 Drachma were minted from 420 kilograms of temple treasury (Moesta and Franke 1995, 47). Athens did not want to serve its own citizens with a new “means of exchange“, but wanted to recruit foreign troupes urgently. The case of Egypt is also impressive, where around 350 BCE, golden statere were minted in the standard of the second (lighter) series of Kroisos (8.21 grams). According to the Egyptian Museum in Berlin (No. VÄGM 1-78), “these gold coins are the only ones from the money-less Pharaonic Egypt. A Pharaoh had minted these for paying the Greek mercenaries [!]... in the Attic coinage standard, without Egypt having to abandon the thousands of years old barter economy.“

4b. Or private commercial circulation only? On “Danegeld”

Now we can also answer the question whether the gigantic precious-metal movements of the High Middle Ages were a result of private “trade“ or whether there were certain meta-economic power-induced proceedings behind them. According to the Anglo-Saxon Chronicle, between 991 and 1018, around 52 million coins were collected as Danegeld. As to Heregeld, only 7.65 million coins have been found from two isolated years (Jonsson 1993, 209, figure 210).

In research on the Scandinavian hoards, it has been found out that German coins were pre-ferred to English coins, which explains the corresponding tributes of the German territories paid to the Scandinavians. However, from these hoards, it has been concluded that “raiding and gelds during the late Viking Age were of small or no importance for the import of coins.... The evidence strongly suggests that trading was the key element responsible for the im-port” (Jonsson 1993, 230).

In this case, the causation works exactly the other way round! Silver was demanded clearly in that age. The Vikings had to live off the silver, which was possible only if they managed to buy commodities against it from other places than those where they could enforce it as tribute. Thus, the territory close to the sea, or rather the river system of Germany, where obviously even the mints were situated (Jonsson 1993, 224-226), proposed itself as tribute-redistribute-tribute area.

This apart, the private trader in later times had never travelled with hard money but with securities, especially bills of exchange, which could be settled at trade fairs by so-called skon-tration (Denzel 1994). The power-holder required daily dues (cash) to preserve his power; the trader, however, was afraid of these claims. He was not actually armed like the tax collec-tor. In 1584, the Fuggers in Augsburg, the famous German merchant company, had to collect 77,000 florins (ca 3,800 pounds) in cash at the Frankfurt trade fair, which was a very tiny amount as compared with Danegeld. However, “they complained that they had not sent enough people there to raise the amount“ (Ehrenberg 1912, 246).

The money-trade model transforms completely into a farce when focusing on the maps of the coin hoards. Most of the money landed in the poorest countries (Kluge 1993, 191, 271, 296, and 319). What should have been exported from Finland, Frisia or Pommerania so that a “surplus” could have been concealed in the trade balance? How about Gotland, that territory of the earth where most of the coins (even Byzantine and Arabic) were actually found, evenly scattered over the entire island (Malmer 1982)? An old narration states that the Goths “went along the water - and so far that they reached Greece” (Guta-Lagh 1818, 107). According to the website of the Historical museum of Gotland http://www.gotmus.i.se/1engelska/skatter/engelska/hoards_from_the_roman_iron_age.htm, its collection of Roman gold coins “probably represented wages and tributes distributed among Scandinavian leaders or warriors.“ Coin hoards consisting of Samanid pieces (10th century CE) were even found on the remote Lofote Islands (Weisgerber 2004, 129). Did peaceful people, living 300 km north of the Polar Circle, trade fish with Samarkand or Bu-chara?

4c. Money and tax liability

The standardization of the precious metal by the power “officials” proves that this money was not minted “privately.“ Therefore, even efforts to trace back the “invention“ of money in the form of a trial and error process (Alvarez 2002), where the “agents” searching for optimum money (Carl Menger’s “most saleable commodity”) proceeded in a tedious searching and learning process, must be deemed futile.

The theory of precious metal “found naturally” has been excluded most recently for elec-tron, the oldest coin metal, as a result of metallurgical research (lead-isotopes). In the Sardeis refinery “controlled [!) electron” had been manufactured by first separating gold from silver and subsequently alloying it with silver at a ratio of 54:45 (Craddock, Cowell and Guerra 2005, 68). This clearly shows that the standardization of coins, that is, the tax metal, can only be done by a central power.

Theories of private invention of money, which led to proposals of “re-privatization” of monies that must “compete” with each other (Hayek 1976), do not withstand historic evi-dences. Even the market (forum, from foris = outside the intangible power centre), where the agents were supposed to meet to look for the ideal “money”, that which would “be trusted generally” (Mitchell Innes 1913), emerged considerably later than the power centres, palaces and temples. These findings verify the excavations or reconstructions of large cities like Troja, Hattusa, Ebla, Megiddo, Tell Beydar, etc.. Markets, and thus the economies them-selves, initially resulted from taxation. “Taxation is imposed in whatever form may be thought desirable and administratively practicable, and taxpayers all over the country [!] are getting liable to make payments to the Government. Some of the taxpayers will be in the marketing centres, but, wherever they are, it is the marketing systems that makes their pay-ments to the Government effective” (Hawtrey 1930, 85).

This conclusion is similar to the definition given by Karen Radner (1999a, 102) for a dif-ferent period. “The Neo-Assyrian tamkaru is a royal agent. Legitimated by the king and equipped with quasi-diplomatic status, he travels near and far to provide the king with the items needed to run state matters smoothly.” Thus, time and again it boils down to the first debt, first tax, first interest, first money, etc., which was determined by the ruler (power/State) and nothing else.

4d. Circulation of power and coins

The earliest Etruscan gold and silver coins were not used as trade money. “So the common characteristics of these first series of Etruscan coins seem to be: low numbers, high face value and a restricted area of circulation. Clearly, as with the earlier pieces minted in the southern regions of Magna Graecia, the very existence of such coins was not dictated by the internal or external trade needs of the areas where they were produced. Above all there was no Etruscan small change” (Catalli 2000, 89 f.).

Most of the coins ever minted were generally adorned with weapons as well as the armed man or the ruler (monarch), and power or control scenes: helmets, spears, armours, victory symbols or designations. The coins themselves often looked like weapons, as in the case of the Chinese “knife” and “halberd coins”, with its declared value dating from the 8th century BCE. Even the first “big coin” of modern times, the “Guldiner” of Sigismund of Tyrolia (1484/6), which was made of silver and later became the “Thaler” and then the “dollar” (Sta-dermann and Steiger 1992), shows an attacking knight in a complete war uniform.

4e. Metal money as weapons money

What do we find as the metal money-material? Weapon-Material! Weapons could be manu-factured directly from such money-material, as in the case of the so-called Beilgeld, which was often found in large hoards throughout Europe: for example, 101 pieces (dpa, 2 Septem-ber 2003) on the Lebuser castle hill in the East German Märkisch-Oderland. The depository of Hénon, one of the many discoveries in Brittany, consists of about 600 of such hatchets.

“If they are collected in the depositories in the same uniformity, then its character as cur-rency strengthened. If in addition, the material analyses disclose such a large content of lead that its application as a tool is excluded, and if the edges are blunt, then it is clear that it concerns equipment money. …Thus, serially mass-design forms... are suspected... to have been used for regulating mutual commitments“ (Müller 2002, 203).

But why were they manufactured in the form of weapons? And why should they suddenly aimed at “mutual” (private) commitments and not at tax debts? The solution is provided by Anatolia. The analysis of the Hittite texts proved that the Great Power demanded its taxes in metal for manufacturing weapons, which resulted in the supply of copper (!) hatchets, axes, sickles in weights accurately adjusted to the shekel standard (Siegelová 2005). In the chamber of the so-called “Stone shrine“ of Yazilikaya, 1.5 kilometres north of the Great temple in the lower city of Hattusa on a mountain slope, we see a procession of men marching with “sickle swords” (Hethiter 2002, 114): one of the usual processions of those liable to tax payment (in this case, delivering their copper tax). The chamber was the arsenal of the Great Power.

“Money”, as long as it represents metal tax, is always found in the form of weapons or that of exercising power: as helmets, double-edged axes, single-edge hatchets, spearheads. Laum (1924, 104-109) has identified this relation between exercise of power, weapons and money in his “holy money” approach. Unfortunately, his concept of reducing the spear (obelos) to the “spit” misses the fact. Both were weapons (see title page of the Etruscan exhibition cata-logue Venice 2000).

The State power in Hattusa did not return the copper articles, which did not have any prac-tical value, but paid their rewards mainly in silver, which was also collected as tax. Thus, there was a circulation of silver (as in Assyria; see Postgate 1974 and Radner 1999b, 135-140; or in Etruria, as mentioned above) but no circulation of copper.

The decisive factor of the Hittite tax system was the fact that also tin was required to be delivered as tax and strictly separated from copper. Bronze as a useful weapon metal can be forged only with the help of tin, the ratio of which had been altered from 14.5:1 to 8:1. Thus, the art of the optimum mixture of copper and tin had to be monopolized so as to preserve power. In no way could finished bronze go out of the power sphere and “circulate”. There are many legends regarding this process, where the smith is imagined to be a cripple or somebody who failed to leave the sphere of power.

4f. Power metal and trade

Trade did not emerge as a peaceful “barter” over close distances. The interaction between villages can be assessed simply by their social contacts, particularly marriages outside the villages. As proved in detail by Bernbeck (1994, 39-47), the probability of marriage contacts in the rural settlements fell to zero after the third distance unit from the second village or the third ring.

However, as the neighbourly exchange or purchase of brides must have been the first peaceful exchange, the question arises as to how the exchange of goods came into being. And how did the exchange over extremely far distances arise, since “long-distance trade“ preceded local trade? However, the issue of how, and carrying along what, a person did set out on a journey from his/her village to eventually find the desired partner for exchange, who had the required barter goods ready with him, remains enigmatic. How did both of them know about each other? How did one know of a commodity so far away that awaited a buyer?
I think that my study leads to the conclusion that the goods traded over far distances were the first tax commodities, which had to be procured to evade sanctions in case of non-payment.

5. Postscript: On the initial endowment of deutsche mark in 1948

What was the “money” that was distributed to people, credit institutions and administrative authorities during the German currency reform of 1948? The Bank deutscher Länder, the fore-runner of the Deutsche Bundesbank, physically advanced the Deutsche Mark to the German “Länder” (the Federal Government did not come into existence before 1949), which had stipulated it as a “legal tender” previously. Thus, the State had sold tax revenues on the final date. This “advance” is classified as item no. 8 on the asset side of the Bundesbank’s balance sheet, the so-called “equalisation claims on the Federal Government.” As at 31 December 2005, they amount to € 4.44 billion and bear an annual rate of interest of 1%. The claims have to be redeemed in ten annual instalments from the year 2024 onward (Deutsche Bundesbank 2006, 120 and 132).

Of course, this will be possible only with the help of additional tax reve-nues or additional public debts, that is, anticipation of future tax revenues.
We, therefore, must in this case deal with pure chartal or State money. The German “money” has not come into existence by mortgaging the property of the German State or that of the Bundesbank. It is rather an (untitled) demand of the Federal Government’s creditors, who do not support their money-generating status with property but with demands that are not considered as property titles but a result of the power and tax monopoly of the German State.

The German chartal money created in 1948 amounted to DEM 6,849 billion (M0 or the ini-tial endowment with central bank money), of which DEM 2,818 billion were handed over to private households, 472 billion to business companies and 3,559 billion to public households (including DEM 772 million to the Military Government; Deutsche Bundesbank 1976, 25, table 1.04). Thus, the German State drew on future tax revenues and discounted them. Chartal money is the debt of power that has the first property on its part. We, thus, once again arrive at the equation: debt = interest = tax = money.

State titles, against which money is given, are claims on State taxes. The banknote is a re-ceipt for a tax payment that is still to be made. The procurement of the means of tax payment is taxed additionally - as the central bank “rate”, which is also emphasized in the Federal Re-serve Act of 1913, section 7. “After the aforesaid dividend claims [6 % guarantee interest rate on shares of 100 $ each, of which a Member Bank can retain only 25,000 $] have been fully settled, all the earnings shall be paid to the United States as a franchise tax [!].”

The State does not offer existing property as security but expected revenues and, thus, fu-ture property, which it enforces or draws with the help of its property in weapons.

6. Editor’s comment on the postscript and author’s reply

Editor’s comment: Having studied section 5 above on the essence of the initial central bank money at the start of the German currency reform of 1948, I wonder whether this money was “pure chartal or State money”, as Paul C. Martin claims. Against his thesis, I want to argue that the amount of DEM 6,849 billion was not created out of nothing, as the theory of chartal money implies. The central bank money of the new currency rather resulted from the devalua-tion and transformation into deutsche mark of the existing (broad) money stock (M3) in Reichsmark (RM), which, at the time of the currency reform, had amounted to RM 144,508 billion - 119,643 billion of which owned by private households and business companies, and 24,865 billion by public households. Of these claims, only RM 100,014 billion were trans-formed, because of the claims of private bodies, a maximum of RM 75,149 billion, or ca 63%, were eligible for transformation at all. On the other hand, the claims of public households were transformed at 100% (Deutsche Bundesbank 1976, 25, Tables 1.03 and 1.04; see also Möller 1989, 76 f.). However, the different treatment of public and private bodies does not allow the conclusion that the former were favoured over the latter and, therefore, the new cen-tral bank money had at least some resemblance to a State money. It must be emphasized that the German authorities had to compensate, by funding so-called “equalisation claims” of DEM 14.8 billion, the private banks for their claims against the former German Reich, which had amounted to RM 140.3 billion (Möller 1989, 77).

Total public debt in Germany, at the end of World War Two, amounted to the enormous sum of RM 440 billion, or as much as 917% [!] of national income; see Tribe 2001, 31, Table 3.4. The system of financing these debts is known as geräuschlose Finanzierung, a system of “silent finance” established to avoid unsettling the people by selling State bonds directly to them or radically increasing taxes. The system can be characterized as the classical case of Government printing money or debtor’s money: RM 299.7 billion of the total debt were fi-nanced by a combination of so-called “Mefo-bills” - paper drawn upon the State-owned Met-allurgische Forschungsgesellschaft, a dummy company set up to simulate commercial activ-ity, whose bills the Deutsche Reichsbank, the Reich’s central bank, was forced to discount - and direct financing by the Reichsbank, while the remaining RM 140.3 billion were financed by forced sales of bonds to the private banks (Hansmeyer and Caesar 1976, 376-380 and 398-407). It goes without saying that the claims of the Reichsbank, unlike those of the private banks, were not compensated at all.

Author’s reply: My interpretation of the German currency reform of 1948:
There was no “devaluation” of the currency (legal tender) RM at all. Any devaluation im-plies the ongoing existence of the devaluated currency, e.g. the USD can devaluate against Euro or vice versa. Both currencies exist before and after the devaluation. The RM ceased to exist as legal tender at the date of the currency reform completely. Before the new DEM could get into the hands of non-banks and banks, the German state authorities (Bundesländer), first had to create the above mentioned “equalisation claims” (Ausgleichs- or Schuldbuchforderun-gen).

These were newly-created claims (liabilities) against themselves. They had nothing to do with former (or “devaluated”) claims of banks or non-banks against the German Reich which also ceased to exist. For example “treasury papers” (Schatzwechsel, unverzinsliche Schat-zanweisungen) of the former Reich, RM 70,2 billion according to the last known report of the Reichsbank (Deutsche Bundesbank 1976, Table 1.01), were completely worthless. The ac-cordingly booked notes in circulation (RM 56,4) plus the deposits (RM 16,7) were worthless as well.

The equalisation claims, denominated in DEM as the new money of account, did not result from “credit operations” of banks or non-banks in favour of the state authorities, but were created out of nothing - similar to sole bills. The debtors de jure were the state authorities, the debtors de facto were the tax- payers of these authorities. It is the German tax-payer who has to pay the remainder of these claims from the year 2024 onward as mentioned.

These claims went to the monetary authorities (Bank deutscher Länder, Landeszentral-banken). These predecessors of the Bundesbank handed out the new DEM as money proper (bank notes) in turn only after receiving these equalisation claims. These bank notes were created out of nothing because the claims which exclusively could be converted into new DEM banknotes also were created out of nothing.

The most striking proof for this creation of “pure chartal or State Money” is seen in the combined balance sheet of all banks (Deutsche Bundesbank 1976, Table 1.02). In their final RM-report they show RM 3,3 billion in cash and 36,4 billion in deposits with monetary au-thorities. After the currency reform these assets were zero. To keep the banks afloat and to avoid bankruptcy of the whole banking system as consequence of lacking assets the banks got DM 6 billion of these claims - by far the largest position of their asset side (total 11,3 billion). These claims now could be used to procure DEM from the mentioned monetary authorities. These claims were distributed to the banks without the banks in any counter-move handing out assets to the State. The assignment was a gift which the State donors created out of noth-ing and which the taxpayer finally had to settle.

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